The Karnataka High Court has ruled that substantial provisions of the Karnataka Police (Amendment) Act, 2021, prohibiting online gambling and skill-based gaming platforms, are unconstitutional. Online gambling is now in a regulatory grey area, with no comprehensive legislation addressing its legality.
The modifications to the Karnataka Police Act were ruled down by the Karnataka High Court on three key grounds: violation of fundamental rights to trade and commerce (Article 19), liberty and privacy (Article 21), and speech and expression (Article 22). (Article 19). Being plainly arbitrary and unreasonable in that it failed to discriminate between two types of games, namely skill and chance games.
Instead of chance, a "game of skill" is dependent mostly on a player's mental or physical degree of proficiency. A "game of chance," on the other hand, is primarily decided by a random component of any kind. In games of chance, talent is used, but success is determined by a larger amount of chance.
In most regions of the nation, skill-based games are permitted, but games of chance are classified as gambling and are illegal in most areas. Because betting and gambling are state-regulated activities, each state has its own set of rules.
State legislatures lack the legislative capacity to establish laws on online skill-based gaming.
The court also found that the state government supplied no evidence or statistics to support a blanket ban, and that it did not appoint an expert committee to investigate the matter.
The court also stated that playing online games might aid in the development of a person's character, and that online gaming can fall within the bounds of freedom of speech and the right to liberty and privacy granted by the constitution.
The court also said that regulating online games rather than outright banning them would be a better and more proportional approach, and it left it up to the State government to draft new betting and gambling legislation in compliance with the constitution's requirements.
The Karnataka government passed the bill to prohibit online gambling and skill-based gaming platforms.
Games like online rummy, poker, and fantasy sports were all outlawed because they included gambling or risking money on an unknown occurrence.
Apart from Karnataka, the Madras High Court knocked down a similar ordinance enacted by the Tamil Nadu government in August 2021. The Kerala High Court also rejected a notification issued by the Kerala government expressly prohibiting the game of online rummy when played for money in September 2021.
Many social activists, government authorities, and law enforcement officials feel that internet games like rummy and poker are inherently addictive, and that playing them for monetary gain leads to sadness, rising debts, and suicide.
'There have been reports of young people who, confronted with increasing debts as a result of losses in online games, have committed other crimes such as theft and murder.' The World Health Organization (WHO) has previously announced plans to classify "gaming disorder" as a mental health issue.
Online games are vulnerable to manipulation by the websites that host them, and it's possible that users aren't playing against other people, but against automated computers or 'bots,' with no fair chance for a regular user to win.
An outright prohibition may not be enough to stop people from playing such online games, whether for fun or for money. Telangana, the first state to outlaw internet gambling in 2017, has seen an influx of illicit or underground online gambling applications.
The majority of them are based in China or other foreign nations, and they receive funds from players via sham firms or hawala networks. The Enforcement Directorate (ED) and local cybercrime authorities have attempted, but failed, to crack down on such apps.
Players' migration to grey or illegal offshore online gambling applications leads to a loss of tax income for the state and job prospects for locals, as well as users' inability to seek redress for unfair behaviour or reluctance to pay out wins.
Instead of a full prohibition, the sector might be licenced and regulated, with different checks and balances in place, including thorough KYC and anti-money laundering procedures. Minors are not allowed to play real money games. Limiting the amount of money that can be staked or the amount of time that may be spent on a weekly or monthly basis. Counseling for addicted gamers and the ability to self-exclude such individuals, among other things.
At the federal level, a Gaming Authority should be established. It might be in charge of managing the internet gaming industry's activities, avoiding social concerns, properly categorising games of skill or chance, ensuring consumer protection, and combating illegality and crime.
Online games are becoming increasingly popular among teenagers. As a result, India's online gambling business has to be controlled. Furthermore, regulating internet gaming would not only create economic opportunities, but will also address the social costs associated with it.
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